Industrial chain sharpens China’s edge
Comprehensive services stabilize global markets, give MNCs many opportunities
Electric vehicle maker Tesla Inc took 12 years to produce its first one million vehicles. But, from the 3-million mark to 4 million, the US carmaker took just seven months, a milestone achieved on March 2 on the back of tremendous contributions from its Gigafactory in Shanghai, which produced over 710,000 EVs last year.
The Shanghai plant also accounted for more than half of Tesla’s 1.3 million vehicles sold globally last year — a testament to the country’s extremely strong supply and industrial chains.
These chains also explain why Chinese consumers are able to buy the latest iPhone models of Apple Inc within hours of their launch via China’s famed online delivery platforms, in contrast to dayslong waits of buyers in other countries. Some 90 percent of such Apple products are made in China.
China’s supply and industrial chains offer comprehensive services from raw material supply, component production, distribution, assembly, processing and logistics to final delivery to consumers, experts said. And the global industrial chain is much better for that fact.
Despite global economic downturn and US sanctions, China has made it clear that any attempts to sever supply chains will harm the world, and the country will continue to play an important and positive role in stabilizing global industrial chains.
According to the latest Government Work Report, the country will accelerate the modernization of its industrial system, with focus on key industrial chains in the manufacturing sector. Pooling of quality resources and concerted efforts for breakthroughs in core technologies in key fields will mark the drive.
On the sidelines of the two sessions, the annual sittings of China’s top legislature and top political advisory body, Jin Zhuanglong, minister of industry and information technology, said that the country will ramp up efforts to stabilize industrial growth and speed up the building of a modern industrial system.
“Targeted policies will be introduced to boost the stable growth of pillar industries, such as automobiles and electronics, while efforts should be made to cultivate fresh growth points in new energy, new materials and other emerging industries,” he said.
According to the Ministry of Industry and Information Technology, China has been the world’s largest manufacturing power in terms of industrial output for years. It is also the only country in the world that has developed all the industrial categories listed in the United Nations industrial classification.
“China is a unique ultra-large single market in the world, and the Chinese market is key to stabilizing the supply of the global industrial chain,” said Huang Qifan, former mayor of Chongqing and executive academic vice-president of the China Institute for Innovation & Development Strategy.
The single market, according to him, is “unified” in law system, tax system, business rules and other factors that are key to economic development. India, for instance, typifies a fragmented national market governed by different state-level law systems and business rules, he said.
“Thus, such a single market advantage (in China) can greatly lower costs related to manufacturing, research and development, fixed asset investment, logistics, market development and even raw material procurement. This scale advantage can reduce 30 percent to 40 percent of the entire manufacturing costs,” he said.
In Huaqiangbei, an area in Shenzhen, Guangdong province, known for electrical goods, local electronic component traders have built a trade ecosystem with the help of WeCom, Tencent’s enterprise communication platform.
Via WeCom, 2,000 local upstream and downstream small and medium-sized traders are connected. As business opportunities can be shared in real time on the sidebars of WeCom, these SMEs can communicate with each other and dock businesses directly.
“Electronic component transactions are usually in huge amounts and fragmented, and it is really hard to find suitable orders offline. But with WeCom, transaction efficiency can be greatly improved,” said Peng Jiaying, president of Shenzhen Mecrli Technology Co Ltd.
Data from WeCom showed that expressions of intent for the docking of electronic components on the platform increased by 186 percent in February compared with the previous month.
“As China’s economy continues to stabilize this year, the surging domestic demand will continue to drive it to be a market that no multinational wants to lose,” said Wang Peng, a researcher at the Beijing Academy of Social Sciences.
“China has great advantages in the global consumer electronics chain for its efficient cooperation of multiple manufacturing steps, including raw material supply and mold design to final assembly,” he said.
Recent years have witnessed market rumors that several tech and manufacturing companies are gauging the feasibility of moving production and assembly away from China to other markets like Vietnam and India.
“For many multinationals, it seems that their acts belie their words, as many of their current production largely relies on China’s supply chain. It would be very difficult for any company to find an alternative in the short term,” said Xiang Ligang, director-general of the Information Consumption Alliance, a telecom industry association.
Xiang said that electronic products like PCs do not generate a big profit margin, thus production costs matter, especially when semiconductors made in China are generally cheaper.
“Forcing these foreign companies to find an alternative is very likely to injure their own production. If supply becomes insufficient, it will be unfavorable for a company’s development and lead to damage to companies’ competitiveness on the global stage,” he said.
Agreed Wu Dongmei, global senior vice-president of Dell, who said in an earlier interview with China Daily that “Dell doesn’t just have a sales office in China” and the company’s development in the country is based on “long-term consideration”.
“Dell has a full value chain here (in China) from design, research and development, production, manufacturing, to supply chain management, sales and services that supports the development of the company’s business in China and globally,” Wu said.
“We’ve become very focused in China since Dell decided to operate in the country. In fact, we have done assessments and many conditions in the Chinese market are basically better than in other places.”
According to a report by market consultancy Canalys, Dell was the second-largest PC vendor in China in the third quarter last year with a market share of 11.7 percent, behind Lenovo Group’s 38.2 percent.
Craig Allen, president of the US-China Business Council, said in an interview that “China is an attractive location for supply chain integration”.
Most US companies investing in China are “in China, for China”, and they hope to serve Chinese markets through highly global supply chains that involve imports and localized production, Allen said.
He also said China’s scale motivates US companies, while the nation’s ecosystem is strengthened greatly by investments in infrastructure and talent.
As the country optimized its COVID-19 response and border control measures, top executives from prominent MNCs have disclosed their plans to visit China this month.
The Wall Street Journal reported that Apple CEO Tim Cook and Pfizer CEO Albert Bourla are expected to visit China this year. France’s L’Oreal Group also confirmed its executives will visit China shortly.
“The decisions of consumers and businesses so far have been more powerful than governments,” said Ed Gresser, former assistant of US Trade Representative for Trade Policy and Economics, in an interview.